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Editorials, Sunday, 05/28/2000

Knight Ridder Guides Estimates Higher
By Cindy Christ

Knight-Ridder, the nation's No. 2 newspaper publisher, told analysts Thursday that earnings would be slightly better than expected in 2000 thanks to strong gains in advertising revenues from technology companies.

The company said it's comfortable with earnings estimates in the range of $3.65 to $3.70 for the current fiscal year.

Analysts polled by First Call/Thomson Financial were looking for fiscal 2000 revenues of $3.64 a share for the publisher.

At an investor conference in San Jose, Calif., Chairman and CEO Tony Ridder said ad sales were up 4.7 percent over 1999 in the first quarter and 5.8 percent in April. For May, he said, overall ad sales would be even stronger.

Ridder attributed the jump to sustained advertising from dot- com companies and improved employment advertising in local markets, especially in San Jose and Contra Costa, Calif., located near the heart of the nation's high-technology industry.

In the Silicon Valley, the Internet has launched an explosion in high-tech jobs, hyping up demand for employment advertising for Knight Ridder's Mercury News, which serves San Jose and the region.

"We now expect overall classified for the year to come in stronger than what we projected," Ridder said.

In addition, Knight Ridder foresees operating cash flow for 2000 at about $890 million and net free cash flow at roughly $400 million.

The company also issued guidance on its Internet unit, KnightRidder.com, and spoke to concerns about consolidation in the media industry.

Dan Finnigan, president of KnightRidder.com, estimated that current-year revenue for the company's Internet arm would exceed $50 million, while expenses would total between $90 and $100 million.

Finnigan said KnightRidder.com should break even in 2002 if the company, which targets information to local markets, can double its current reach and user numbers.

Employees of KnightRidder.com have been granted stock options, making it a near certainty that the company will eventually go public.

"My best guess it that that will happen, but given market conditions, not this year," Ridder said.

With mergers rampant in the industry, Ridder told investors that his firm has no interest in being acquired or making a bid for a local paper.

"We may look, but the public market prices are very steep. Doing a deal that is highly dilutive with no offsetting business advantage is not a part of our strategy," Ridder said.

To support its stock price, Knight Ridder said it would continue to repurchase stock in the open market under a buyback program authorizing up to 6.1 million shares. Year to date, the company has repurchased 5.4 million shares.

Investors initially applauded the upbeat view, bidding up Knight Ridder (KRI) shares to $53.62 in morning trading. But later in the day, shares backed off to close down $0.56, or 1.1 percent, at $51.25.

 


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